Sensex (14141.5)
It was a nightmarish week in which the global equity markets plunged in to an abyss even as the Central Banks worked overtime to assuage the investors' sentiment and maintain financial stability. We have the mid-week holiday to thank for the relatively stronger performance of the Sensex.
FIIs sold heavily in cash as well as derivatives on Thursday thus spooking the sentiment. Low Nifty put call ratio indicates that short positions are being covered at lower levels. The open interest above Rs 80,000 crore continues to be a cause of concern. It is imperative to utilise rallies to square leveraged positions and not indulge in averaging. The Sensex has gone below the support at 14500 and attained our medium-term target of 13748. The daily momentum indicators are in the over-sold region while the weekly momentum is just threatening to turn negative.
The Sensex has also bounced off the 200- day moving average on Friday which is a positive for the short-term. The low of 13780 recorded last week has completed 61.8 per cent retracement of the up-move from the March trough of 12316. It has also completed the minimum retracement requirement for a correction of the rally from 8800. In other words, if this is just another correction in an ongoing bull-market, Friday's low can be a significant intermediate-term bottom.
The ensuing week will tell us if this assumption is right. But volatility is expected to continue in the near term and the Sensex is expected to move in a range between 14880 and 13138 for a few weeks before reversing up. A move below 13138 would however prove to be lethal as the market can go in to a tailspin thereafter.
For the week ahead, the Sensex could move up to 14425 or 14880. Move beyond the second target would indicate that the correction is at an end and failure to cross the first would usher in heightened volatility and the Sensex could fall to 13779, 13589 or 13138.
Nifty (4108)
Nifty too attained the medium-term target of 4028 last week leading to the assumption that the one year bull phase from the low of 2595 is now being corrected. A shallow correction can end at this point. But a deeper one can take the Nifty to the next target of 3860. Bulls need to guard this level if they want to avoid a prolonged corrective phase.
For the week ahead, the Nifty can try to move upwards to 4202 or 4331. Move above 4331 will signal the end of the current correction whereas a reversal from 4202 will pull the index lower to 4043, 3965 or 3874.
Global Cues
The resilient markets in Asia and Latin America such as Hong Kong, Indonesia, Brazil, Malaysia, Philippines, Korea, Singapore and Taiwan joined in the tumble-party last week. Nikkei was among the worst performers with a 9 per cent loss. There is no doubt that the one-year long bullphase that began last July has now ended in the global equity markets. The question is whether this is the end of the four-year long bull market that commenced in 2003.
The consoling factor is the strength in the Dow Jones Industrial Average. The DJIA made an intra week low at 12517, but has bounced smartly from there. A rally beyond 13500 will signal that the correction is at an end and the bulls can take over from there. Commodities saw a meltdown in sympathy with the equities. Comex gold crashed to a low of $641 on Friday before taking support at its 200 DMA. Base metals such as copper and aluminium are also plunging in to an abyss. Nymex crude is in a medium-term down trend though it spent the week moving in the band between $71 and $74. - Lokeshwarri S. K.
It was a nightmarish week in which the global equity markets plunged in to an abyss even as the Central Banks worked overtime to assuage the investors' sentiment and maintain financial stability. We have the mid-week holiday to thank for the relatively stronger performance of the Sensex.
FIIs sold heavily in cash as well as derivatives on Thursday thus spooking the sentiment. Low Nifty put call ratio indicates that short positions are being covered at lower levels. The open interest above Rs 80,000 crore continues to be a cause of concern. It is imperative to utilise rallies to square leveraged positions and not indulge in averaging. The Sensex has gone below the support at 14500 and attained our medium-term target of 13748. The daily momentum indicators are in the over-sold region while the weekly momentum is just threatening to turn negative.
The Sensex has also bounced off the 200- day moving average on Friday which is a positive for the short-term. The low of 13780 recorded last week has completed 61.8 per cent retracement of the up-move from the March trough of 12316. It has also completed the minimum retracement requirement for a correction of the rally from 8800. In other words, if this is just another correction in an ongoing bull-market, Friday's low can be a significant intermediate-term bottom.
The ensuing week will tell us if this assumption is right. But volatility is expected to continue in the near term and the Sensex is expected to move in a range between 14880 and 13138 for a few weeks before reversing up. A move below 13138 would however prove to be lethal as the market can go in to a tailspin thereafter.
For the week ahead, the Sensex could move up to 14425 or 14880. Move beyond the second target would indicate that the correction is at an end and failure to cross the first would usher in heightened volatility and the Sensex could fall to 13779, 13589 or 13138.
Nifty (4108)
Nifty too attained the medium-term target of 4028 last week leading to the assumption that the one year bull phase from the low of 2595 is now being corrected. A shallow correction can end at this point. But a deeper one can take the Nifty to the next target of 3860. Bulls need to guard this level if they want to avoid a prolonged corrective phase.
For the week ahead, the Nifty can try to move upwards to 4202 or 4331. Move above 4331 will signal the end of the current correction whereas a reversal from 4202 will pull the index lower to 4043, 3965 or 3874.
Global Cues
The resilient markets in Asia and Latin America such as Hong Kong, Indonesia, Brazil, Malaysia, Philippines, Korea, Singapore and Taiwan joined in the tumble-party last week. Nikkei was among the worst performers with a 9 per cent loss. There is no doubt that the one-year long bullphase that began last July has now ended in the global equity markets. The question is whether this is the end of the four-year long bull market that commenced in 2003.
The consoling factor is the strength in the Dow Jones Industrial Average. The DJIA made an intra week low at 12517, but has bounced smartly from there. A rally beyond 13500 will signal that the correction is at an end and the bulls can take over from there. Commodities saw a meltdown in sympathy with the equities. Comex gold crashed to a low of $641 on Friday before taking support at its 200 DMA. Base metals such as copper and aluminium are also plunging in to an abyss. Nymex crude is in a medium-term down trend though it spent the week moving in the band between $71 and $74. - Lokeshwarri S. K.
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